When does a car lose the most value? The answer is simple. Most cars lose the biggest chunk of their value in the first year, and the drop starts the day the car leaves the lot. After that, the loss slows down, but it never fully stops.
If you plan to sell your used car or junk car, knowing how car depreciation works can help you set the right price. It can also help you pick the best time to sell.
The Biggest Drop Happens in the First Year
A new car loses more value early on than at any other time in its life. The first few months and the first year are the hardest hits.
The First Month
Carfax data shows a new car can lose more than 10% of its value in the first month alone. That means a car bought for $40,000 could be worth about $36,000 only weeks later.
The car is still brand new in every way that matters. But once it has an owner, it is no longer sold as new. Buyers want a discount for that.
The First Year
By the end of year one, the loss is even bigger. Here is what different sources report:
- Carfax estimates about 20% value loss in the first year.
- Experian reports an average loss of around 16% in year one.
- Edmunds says new cars lose anywhere from 6% to 45% in the first year, depending on the model.
The numbers are not the same everywhere, but they all point to one thing. Year one costs owners the most.
How Much a Car Loses Year by Year
After the big first-year drop, a car keeps losing value each year. The loss gets smaller as the car gets older.
Example: A $45,000 Car Over Five Years
Experian shows how a new car with a $45,000 starting value loses worth over time:
| Year | Estimated Value |
|---|---|
| Year 1 | $37,800 |
| Year 2 | $32,400 |
| Year 3 | $27,450 |
| Year 4 | $23,400 |
| Year 5 | $20,250 |
Look at the first two years. The car loses $12,600 by the end of year two. Then it loses about $12,150 over the next three years combined.
Why Years 2 to 5 Still Hurt
Experian says new cars lose about 16% in year one and about 12% more in year two. By year five, the average car has around 45% of its starting value left.
Other studies agree. The iSeeCars study looked at more than 950,000 five-year-old cars sold between March 2025 and February 2026. It found the average car lost 41.8% of its value over five years.
Here is a quick look at the range:
- Lowest five-year loss: 9.6%
- Average five-year loss: 41.8%
- Highest five-year loss: 63.1%
So some cars hold their value very well, and some lose more than half of it.
What Makes a Car Lose Value Faster
Not every car loses value at the same speed. A few things can make the drop bigger or smaller.
Type of Vehicle
The iSeeCars study found electric vehicles lose more value than other vehicle types. They dropped 57.2% in five years, compared to the 41.8% average for all cars.
Luxury cars can also lose value fast. Some luxury models lost more than 60% in five years.
Mileage and Age
Every mile adds wear. Many drivers put on about 12,000 miles a year, and a car with much higher miles than that is usually worth less.
Age matters too. A two-year-old car may have already lost as much as 40% of its value, according to AOL Finance.
Condition and Damage
A clean car with service records sells for more than a car with dents, rust, or engine trouble. Accident damage can also cut the price. Even small problems add up when a buyer checks the car.
Brand and Model
Some brands are known for lasting a long time. Buyers pay more for those cars, so they lose value more slowly. Models that are expensive to fix or less popular tend to drop faster.
When Does the Drop Start to Slow Down
The steepest loss comes early. As a car ages, the yearly loss gets smaller.
Years 4 to 7
Many sources say that after the first few years, a car loses about 8% to 12% of its value each year. The price is still going down, but not nearly as fast as before.
This is why many people see a five-year-old car as a sweet spot for buyers. The biggest hit has already happened.
Year 10 and Beyond
After about 10 years, the yearly drop slows even more. At this point, the car’s value is mostly tied to its condition, miles, and how well it runs.
When a car gets very old or stops running, its value can fall to what the parts and metal are worth. That is often when owners decide to sell a junk car.
What This Means If You Want to Sell Your Car
Knowing when a car loses the most value can help you make a smart choice about when and how to sell.
The Best Time to Sell
If you still owe money on your car, selling sooner may help you avoid owing more than the car is worth. Cars lose value fast in the early years, and loan balances do not drop as quickly.
If your car is older, the value is not falling as fast each year. But it is still going down, so waiting too long can cost you.
Selling an Older, High-Mileage, or Junk Car
Older cars have already taken the big value hit. What is left depends on the car’s condition and what buyers need right now.
A car does not have to run to have value. Cars with engine problems, body damage, or failed smog tests can still sell for cash. A buyer may want it for parts or scrap metal.
Ways to Hold On to More Value
You cannot stop depreciation, but you can slow it. Try these steps:
- Keep up with oil changes and routine repairs.
- Save your service records.
- Fix small dents and scratches before they spread.
- Keep the inside clean and free of smells.
- Try not to add extra miles you do not need.
Cars lose the most value in the first year, with the biggest drops in the first month and the first 12 months. After that, the loss slows down each year, but it keeps going. Waiting too long to sell can mean getting less cash for your car.
If you want to sell a used or junk car in Southern California, Sell My Car SoCal buys cars in all conditions. Whether your car runs great or does not run at all, you can get an offer and skip the hassle of listing it yourself.